The recent news that Chinese regulators are discouraging local companies from buying Nvidia’s artificial intelligence chips has caused some concern among investors. Nvidia stock (NVDA) fell as much as 2.8% in premarket trading on Monday, but recovered slightly to around $120 later in the day.
Beijing’s push for Chinese companies to buy chips from domestic manufacturers instead of Nvidia has been attributed to escalating trade tensions with the US. This has had a noticeable impact on Nvidia’s stock, with shares ending the day down 2.2% and falling further early Monday. In contrast, Chinese AI chipmaker Cambricon Technologies (688256.SS) saw a 20% surge in trading on Monday.
Other semiconductor companies were also affected by the news, with the PHLX Semiconductor Index (^SOX) dropping 1.2% and Nvidia rival Advanced Micro Devices (AMD) falling slightly. Qualcomm (QCOM) shares remained flat, while Intel (INTC) and memory chipmaker Micron (MU) saw declines.
Despite these challenges, Nvidia has been adapting to the changing landscape by creating specific versions of its chips for the Chinese market that comply with stricter export controls. The company’s “H20” Hopper chips for China have already launched and are expected to generate significant revenue this year. Nvidia also plans to release a version of its latest Blackwell chip, called “B20,” for China in the future.
Sales in China have shown signs of recovery in recent quarters, with revenue topping $3.7 billion in the most recent quarter. Analysts remain bullish on Nvidia, with about 90% of Wall Street analysts recommending buying the stock and projecting shares to rise to $147.61 over the next year.
Overall, despite some uncertainties in the semiconductor sector, there is strong optimism surrounding Nvidia among industry leaders. The company’s ability to adapt to changing regulations and market conditions has positioned it well for future success.
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